Gov. Ned Lamont and legislative leaders cleared a big hurdle last week on their way to adopting a new state budget when they compromised on the spending cap.
Another key obstacle was removed Friday when the administration struck a last-minute deal to avert strikes at 51 nursing homes and 193 group homes for clients with developmental disabilities.
But with nine days remaining in the regular 2025 session, one challenge remains.
Will rank-and-file Democrats in House and Senate majorities accept a new two-year state budget that makes far more modest investments in health care, social services and special education than they promised to deliver just a few months ago?
And if so, how will they explain that as Connecticut wraps this fiscal year in five weeks with the second-largest surplus in state history — its eighth consecutive robust finish?
“I’d be surprised if we didn’t have [a budget deal] done in the next couple of days,” House Speaker Matt Ritter, D-Hartford, said Monday, adding that he expects the “vast majority” of Democratic legislators will support what leaders negotiate with the Lamont administration. “You might get a few people who can’t get there.”
Those who fall into that last category likely are those with good memories.
Legislators asked to temper increases for Medicaid, social services
Democratic leaders pledged Jan. 28 at the Capitol to dramatically increase the state’s Medicaid payments to providers who treat the poor, a rate schedule that hasn’t been revised comprehensively since 2007. Critics say thousands of low-income residents effectively are uninsured or underinsured, unable to find physicians willing to treat them.
A 2019 analysis by KFF, the health care think-tank formerly known as Kaiser Family Foundation, found that Connecticut’s Medicaid rates for most specialists ranked 42nd among all states while those paid to primary care doctors ranked 22nd.
Democrats pledged to boost rates roughly 75% by increasing annual funding by $250 million over four years, beginning with a $75 million infusion in 2026.
Ritter didn’t provide full details of ongoing budget talks but confirmed that target would be scaled back considerably.
The compromise on Medicaid funding “is probably the one that is most disappointing,” said the speaker, who noted that for every $1 in spending Connecticut cuts in this area, it loses roughly 50 cents in federal reimbursement. “We’re just leaving money on the table.”
That’s because while Lamont recently agreed to exceed the constitutional spending cap, which keeps budget growth in line with household income and inflation, this fiscal year, normal cap limits come back in force in the coming biennium.
The cap creates a similar challenge for those legislators worried about the private nonprofit agencies that deliver the bulk of state-sponsored services to clients with developmental disabilities, mental health and addiction issues, and those re-entering society after incarceration.
The industry, which misses out on hundreds of millions annually through state payments that haven’t matched inflation for decades, asked for a $264 million increase next fiscal year and another $237 million on top of that in 2026-27.
Legislative leaders won’t come close to those numbers in the final budget.
Ritter said it should hold funding flat in the first year and add about $76 million in 2026-27.
The industry also will get more funds because Lamont struck a deal Friday to avert strikes at nursing homes and group homes. That agreement calls for the state to spend $149 million over the next two fiscal years combined on social service agencies running group homes, according to SEIU 1199 NE, the state’s largest health care workers’ union.
But those funds would be dedicated only to employees’ wages and benefits and only for nonprofits serving clients with developmental disabilities.
Will rank-and-file lawmakers accept these more modest investments in Medicaid and social services?
Rep. Jillian Gilchrest, D-West Hartford, co-chairwoman of the Human Services Committee and one of the leaders who pitched the big Medicaid investment in late January, said it will hinge on the final budget totals leaders negotiate with Lamont. In other words, will the proposed funding still be enough to make a difference?
“I don’t think the caucus will accept an austere … Medicaid increase or nonprofit increase,” she said, adding that it’s hard to accept in this era of big budget surpluses.
Since resetting its budget caps in 2017, Connecticut has closed the last seven fiscal years with an average surplus of $1.8 billion, which represents 8% of the General Fund. That cushion is even larger considering about three-quarters of the budget involves wages, benefits, Medicaid, debt service and other fixed costs.
This year’s projected surplus approaches $2.4 billion or 10% of the General Fund. And analysts estimate the state will continue to save more than $1 billion annually through at least 2028.
The state has been using those funds to accelerate paying down a huge pension debt amassed between 1939 and 2010. But increasing numbers of legislators are questioning whether one generation is being overburdened to solve a problem created by three.
Sen. Cathy Osten, D-Sprague, co-chairwoman of the Appropriations Committee, also finds it hard to accept Connecticut can’t afford to do more to help vulnerable residents.
She declined to predict how rank-and-file legislators would embrace the final, negotiated budget but said many of her colleagues are ready to invest more in Medicaid and social services.
“They have been some of the top topics that people are concerned about,” she said, adding that special education falls into that category as well.
More funding for K-12 schools, no ECS cuts
A special education funding crisis in local schools sparked legislators from both parties to defy Lamont earlier this year and approve an extra $40 million for K-12 districts, despite warnings from the governor this would push current finances over a cap that keeps budget growth in line with household income and inflation.
Legislators and Lamont ultimately compromised and used an accounting gimmick that first moved the $40 million for special education outside of the formal budget — and the spending cap system — and then transferred funds to K-12 districts.
The Appropriations Committee in late April recommended continuing that $40 million in extra funding — and adding another $84 million — in each of the next two fiscal years.
Ritter said leaders will maintain the $40 million increase approved this year but can add only about $35 million to it because of the cap.
At the same time, however, the new budget is expected to add roughly $26 million over the coming biennium to ensure no K-12 school districts receives less Education Cost Sharing funding. The ECS program offers the state’s chief operating grant for municipal school districts.
Ritter predicted that city and town leaders in general would be pleased with the municipal aid package lawmakers were able to negotiate with the governor.
Lamont, a fiscal moderate who has called the spending cap “sacrosanct,” repeatedly has urged lawmakers to embrace budget caps to avoid the huge deficits and large tax hikes that dominated the 2010s.
Connecticut, which still has more than $35 billion in unfunded pension liabilities, has dedicated about $8.6 billion toward reducing pension debt since 2020.
“We appreciate the legislature being collaborative throughout the budget process in the closing weeks of the session,” the governor’s communications director, Rob Blanchard, said Monday. “The governor looks forward to signing an honestly balanced budget that makes smart investments in the future without raising taxes.”
